Stamp Investing and the Internet?
I can hear the sides lining up already, but before you dig your heels in I just want to take an objective look at the question. Stamp investing has been discussed by various authors over the years. Some believe it is about collecting while others believe investing is the future of philately.
Before I begin there needs to be a few definitions. The first is the investor type – philatelic (collector) or commodity investor (investor). A collector is someone who is building a collection, or purchasing items with knowledge of philately and (possibly) purchasing them with the hopes that they will increase in value over time. This does not include collecting for fun such as topicals, etc. An investor is someone with little or no knowledge of philately and who is making purchases with the hope that the value will increase over time and they can sell for a profit.
What are the key factors the need to be considered.
- Authenticity – is the item authentic and easily verified and graded?
- Valuation – How does the item grade?
- Pricing – What can you buy or sell the item for?
- Marketability – Is there a market where you can buy/sell your stamp. Is there a market maker?
Most collectors make purchases at shows, from dealers, off the Internet, etc. They purchase loose stamps with or without a certification (cert). Even knowledgeable collectors purchase their higher value stamps this way (from trusted sources I hope). Loose stamps tend to have a wide spread (bid/ask or buy/sell price). Among other factors, this is due to differences in opinion regarding grade or condition when you go to sell. True commodity investors would not purchase items this ways. So, is there an option, yes – “slabbed” or encapsulated stamps.
As you can see, a slabbed stamp has been graded by a certifying agency, and then sealed in a tamper resistant container. Whenever it comes time to sell, grade and condition are no longer as much of an issue. If you’ve been a shrewd buyer you might even consider encapsulating a few of those special gems. Unfortunately, sometimes it is a non-philatelist family member trying to determine what the item is. This makes it much easier for them as well. An encapsulated stamp helps to narrow the “spread” as well since now the item is “known”. This solution provides a benefit to both collectors and investors. It provides well defined set of standards for the item and takes care of the authenticity question. You can find out about encapsulation by visiting the American Philatelic Society (www.stamps.org), expertizing division, or search our list of dealers at the ASDA, American Stamp Dealers Association (www. americanstampdealer.com) under expertizing.
What is the item worth? If you already own it you know what you paid. The real question is what you can get for it now. Catalogs don’t always reflect real-world pricing with many dealers selling at a percentage of catalog value. This is where the “spread” comes in. A search of the Internet can have prices all over the place for the same item. I checked US Scott C-18 and found prices from $60 to $250 (I am not mentioning the stupid prices. I also found an encapsulated VF Mint OG stamp selling for $95, while the average was around $60.This begs the question, are encapsulated stamps less desirable? This may be the case. Within the collector community encapsulation never really took off. If investors came into the market in any number this could change as the perceived value would be higher. The problem, for now, is that (unlike stocks or the bullion market) there is no reliable, centralized pricing. This is a real problem.
What about marketability? While I did not try to sell anything I did try to find published buy prices for my item. I couldn’t! However, based on conversations with a few dealers, and my own experiences, I could reliably get about 50-70%, depending on the dealer. That is a pretty good spread. The truth is, there is no Market Maker. With stocks there is a buyer of last resort for the majority of stocks. With bullion and bullion based coins you can always expect to get close to market with a very small spread between buy and sell prices.
What about market makers? There really aren’t any. Afinsa Bienes Tangibles, S.A. engaged in trading and investing of collectible tangible assets. They built portfolios of stamps for investment, becoming a source of sorts for investors. After investigation by the Spanish government several executives were jailed on a variety of fraud charges. According to Bloomberg (www.bloomberg.com), as of September 18, 2017, the company is in liquidation. Several other firms have attempted to offer portfolios of stamps to collectors with dismal results. So what does all this mean?
Nothing has really changed for collectors. We can get items authenticated and valued fairly easily. That ability has existed for some time now. We can pick items that we feel are good buys, put them away, maybe get them certified, and if we have speculated well, sell at a profit later. However, things still have a ways to go for investors. Pricing is inconsistent across the Internet (and even between catalogs), and selling a stamp is still problematic for collectors and investors alike. There are no market makers and no guarantee that you will even be able to sell when you want to. Accurate pricing and salability are requirements for any investor. The Internet is still wild territory in this respect and while there are people trying to change that, it still has a long way to go before we can sell the idea of stamps as an investment to investors.
About the author, Bruce Drumm owns and operates a web design and hosting company, Servers, Inc® – www.servers-inc.com, dedicated to philately and e-commerce. He’s been designing sites since 1997 and has partnerships with Adobe, Google, PayPal, Microsoft, and others. As a collector, he has an understanding of philately and how to do business on the Internet.